But despite rising margins and profit, investors are concerned about the slowdown in smartphone sales growth on the most profitable high-end models. Samsung's sales of its premium-to-mid-range Galaxy lineup of flagship Android smartphones grew from 19 million to 22 million on a yearly basis, according to analyst estimates, a growth of 15 percent. By contrast in 2011 Samsung had sold only around 5 million Galaxy S2s, according to Gartner, Inc. (IT).

Overall smartphone sales growth for Samsung (including budget models) follows more of a consistent (in a linear sense) growth track, reaching an estimated 76 million units in Q2 2013. But analysts' earnings expectations were anchored largely on a more bullish growth of sales of the premium Galaxy units.

As a result, Samsung missed by 5.5 percent a consensus profit expectation of 24 analysts gathered by Bloomberg. A survey of 13 analysts by UK-based Financial Times, a Pearson PLC unit (LON:PSON), had predicted a 7.80T won net profit, just slightly above the delivered result.

Apple saw similar levels of growth in its mix of its premium-priced flagship model and mid-range priced older models. In fiscal Q3 of last year (calendar Q2 2012) Apple sold 26 million units, and this year sales grew to 31.2 million units, up 29 percent. However, Apple's unit sales growth in general has been flatter, but steadier over the last two years, where as Samsung's started strong but appears to be decelerating.

But again, that only tells half the picture. While Samsung's growth seems to be showing negative momentum on the premium-to-mid-range end (Galaxy v. iPhone), Samsung's revenue and earnings growth tell a far different picture. Samsung's profit has been steadily rising on a quarter-to-quarter basis since 2011. By contrast Apple, despite increasing revenue has slid in profit.
One secret to Samsung's steady increase in profits is its diversity. Despite a languishing PC market, Samsung reported surprising rises in profit for its semiconductor and display panel divisions. The semiconductor division -- which is estimated to do $8B USD+ in business with Apple alone this year (its largest customer) saw only a 0.9 percent rise in total revenue, but managed to squeeze out a 70.8 percent rise in profit to 1.768T won ($1.58B USD). Similarly the display panel unit saw a 0.5 dip in revenue, but managed a much bigger 57.7 percent boost to profit, which reached 1.120T won ($1.01B USD).

Samsung is now producing NAND on the 10-19 nm node. [Image Source: Samsung]

Consumer electronics (which includes dishwashers, refrigerators, microwaves, stoves, and other Samsung-branded household electronics products) was down a fair amount (41.1 percent on a year-to-year basis) to dip to a profit to 430B won ($390M USD).

Analysts -- particularly in 2012 -- became fond of deriding Samsung's "unprofitable" units, emphasizing the smartphone unit was the only one driving value. Thus perhaps the most surprising story in the Q2 earnings is Samsung's chipmaking units showing their merits, picking up the slack for the premium smartphone sales slowdown and driving profit up. That performance is fortunate as it helped Samsung avoid a far bigger profit miss.

In short Samsung's report card reads something like:

Revenue B

Profit B-

Budget Phones: B+

Mid-to-Premium Smartphones: C

Consumer Electronics D

Semiconduct/Display A+

This is a surprising storyline to say the least, but the good news is Samsung is diverse and looks to be sustaining strong smartphone growth, at least on the budget end. The bad news -- as analyst point out -- is that profit growth may slow, as Samsung is unlikely to be able to sustain such large growth percentages in its other units. That means that the premium smartphones will have to step up in sales, something analysts are concerned they may be unable to do.

Seoul-based CIMB Group Holdings Bhd's analyst explains this pessimism to Bloomberg, remarking, "Samsung is trying to make its profit structure largely balanced. [But its] smartphone margin may decline in the future but the components businesses, either chips or displays, will become a major profit driver to help it sustain the overall profit."

Plastic is ok... Samsungs plastic is cheap. Go to a carrier store and compare an S3 or S4 to droid DNA or some other plastic phone. Compare a note or tab tablet to a Nexus 7 or a nook. Sammy could really stand to raise their game on build quality. That and that alone is why I didn't get an S4. I still have my S3, waiting on verizon to release a descent non samsung high end phone.

Just because something is lightweight and made of plastic, doesn't mean it's "cheap". I've handled plenty of S4's, I don't get what's "cheap" about it.

You're saying Samsung's plastic is "cheap", but other peoples plastic isn't. That makes no sense lol. It's the same stuff!

If there were a constant stream of complaints about Samsung displays falling out, the back covers popping off, the buttons failing, or the batteries and cards not making contact, then I may give those comments some merit. But I haven't seen such complaints.

What I have seen is TONS of HTC One's that break on the first drop. Usually the speaker grills and the bezel break off the phone, as they're just glued on. So much for aluminum automatically meaning higher build quality.

quote: You're saying Samsung's plastic is "cheap", but other peoples plastic isn't. That makes no sense lol. It's the same stuff!

That's not really true is it? Just go into a department store and pick up and handle any range of plastic sheathed small consumer items, compare how the most expensive feel in your hand to how the cheapest feel. Mostly, but not always, the more expensive ones will feel significantly better, and will probably have other advantages such as greater durability, greater colour retention, greater stain and discolouration resistance etc.

quote: Just because something is lightweight and made of plastic, doesn't mean it's "cheap"

The light weight isn't the problem. The plastic is. And it being made of plastic, in Samsung's case, does mean that it's cheap. It's factually cheaper to product.

Your attempt to align cheapness with faults is also misinformed. Nobody is saying plastic wont do the job. They are saying that it does the job cheaply . There is a difference between premium and more functional. Premium can include a variety of other factors such as cost, how nice it looks, how nice it feels. It doesn't necessarily have to function better.

And by the way, in drop tests all around the internet the S4 loses out to the iPhone and HTC One. Just look at several videos online. The point I'm making, though - is that even if this weren't true it doesn't matter, plastic is still cheap.

I have to agree with Reclaimer on this... If this were a discussion about HTC's Aluminum vs. LG's plastic you wouldnt even have responded. It's Apple and a major competitor, so here you are... And guess which side you are on?

Back to point, Plastic can be done well and Aluminum does not always mean high quality. It just happens to be that Samsung's plastic implementations can be considered cheaply done. If you are looking for an example of well done plastic, Samsung is the last place you want to start.

LOL... I know. The worst fanboy is the one that wont admit it, ever, no matter what. At least Tony will come out and say, yes, I am a huge Apple fan. TG has, for at least a year only posted in Apple articles and only posted in favor of Apple, no matter the issue. Whether its the trial, patents, products, hardware, software, or just the company info/maneuvering... Its 100% apple, all the time, no matter what. Then he gets all pissed off at anyone that dares to disagree and starts insulting their intelligence. But... I am not a fanboy.

Plastic can be done well. All I am saying is Samsung can do a better job with quality and plastic. Go to a carrier store and compare an S3 or S4 to droid DNA or some other plastic phone. Compare a note or tab tablet to a Nexus 7 or a nook. Sammy could really stand to raise their game on build quality.